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In a company's first year in operation, it made an annual profit of \( \$ 204,000 \). The profit of the company increased at a constant \( 18 \% \) per year each year. How much total profit would the company make over the course of its first 24 years of operation, to the nearest whole number?

Ask by Watson Carroll. in the United States
Feb 04,2025

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The company would make a total profit of approximately \$59,056,870 over the first 24 years of operation.

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To find the total profit over the company's first 24 years with a constant annual profit increase of 18%, we can use the formula for the sum of a geometric series. The profit in the first year is $204,000, and each subsequent year it increases by a factor of \(1 + r\), where \(r = 0.18\). The total profit \(S\) for 24 years can be calculated using the formula: \[ S = P \cdot \left( \frac{1 - (1 + r)^n}{1 - (1 + r)} \right) \] where \(P\) is the first year's profit, \(r\) is the growth rate, and \(n\) is the number of years. Here, \(P = 204,000\), \(r = 0.18\), and \(n = 24\). \[ S = 204,000 \cdot \left(\frac{1 - (1 + 0.18)^{24}}{1 - (1 + 0.18)}\right) \] Calculating the sum gives us: \[ S \approx 204,000 \cdot \left(\frac{1 - 11.021}{-0.18}\right) \approx 204,000 \cdot \left(\frac{-10.021}{-0.18}\right) \approx 204,000 \cdot 55.661 = 11,363,922 \] Thus, the total profit over the first 24 years of operation is approximately \(\$11,363,922\).

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